Kunal Bahl, Co-Founder of Snapdeal in his latest interview to Economic Times has stated , “We are an IT company and we are a software company. We are not an ecommerce company”.
Ironically, the same gentleman had said something far more contradictory in his interview to Firstpost in February this year. Here’s what he told ,
…we believe once our investments in technology and logistics infrastructure reach a satisfactory equilibrium, we should become the most profitable e-commerce company in India.
So which of these is true? There is little doubt to the fact that Snapdeal is an e-commerce player. Even their Ad Campaigns are purely based on their prowess and eagerness to get the foreign investments at a time when they are also looking to acquire startups in US. Let’s take a look at their advertising campaigns, which also highlight the same fact.
The Snapdeal Salebration Campaign
Both these campaigns highlight the fact that Snapdeal is undoubtedly an E-commerce campaign. The recent ploy by Snapdeal to emerge as an IT company is purely from an investment point of view since ecommerce firms are not allowed to have FDI in India.
The founder of Future Group, Mr. Kishore Biyani, had stated in a newspaper interview earlier this week, “Marketplace Model is Just Smart Accounting“, something which I totally agree with. The e-commerce industry essentially is not much different. The real point of difference lies in how you are accounting for the inventory. Accounting the inventory in your supplier’s balance sheets, helps keep your inventory low and increases your inventory turnover, thereby making your balance sheet look better than it actually is. Snapdeal cannot quite take advantage of this if we compare it with a company like Alibaba, which is a pure play marketplace.
Flipkart, on the other hand, is off-shooting its businesses and looking at a sum of the parts valuation- a factor that helps it in raising funds from overseas ( much to the ignorance of Indian government regulations ) and will also help in when it looks to raise funds in the form of debentures later this year. If I start analyzing the rate of its cash burn over the 8 years of its existence, there is definitely a lack of business acumen when people talk of investing in Flipkart. A company has to make profit, it cannot be a perennial loss making venture. Looking at the given scenario, even Amazon is posting losses these days ( though I regard it more as a product company than as an e-commerce venture).
Now, coming back to the point, is Snapdeal an IT company? Definitely no. However, such statements from a co-founder does bring to question a major point that’s plaguing startups: How soon should one diversify and change its business model completely? Is it correct to change your stand in couple of months when entire India looks upto you? Probably not.
At the same point of time, there is no loss of admiration for Kunal Bahl for what he has built over the years. A video in InkTalks in this regard, throws light on the early part of Snapdeal’s journey:
This is one story that we will keep tracking ! #Snapdeal
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@Abhirup I concur this is a smart ploy by snapdeal in wake of centers recent position to review FDI in E-commerce. Snapdeals projection of itself as an online marketplace is in line with the FDI policy for multi brand retail which allows 100% FDI in B2B commerce. This re-branding as an IT company is further called into question considering snapdeal has recently acquired a stake worth 1200cr in the logistic company GoJavas and their suppliers use services of the parent company viz. logistics and warehousing.
absolutely great point put forward @Mihir Shah . I personally feel both Snapdeal and Flipkart will in future like to be viewed as conglomerates rather than individual ecommerce portals.